Question

A payments system based on money is A. more efficient than a barter economy because fewer prices are needed to establish relative values between all commodities. B. less efficient than a barter economy because a money economy requires that there be a double coincidence of wants in order for there to be an exchange.

Answer 1

Answer: Option A

Explanation: A money based payment system is the one in which the transactions involving exchange of goods and services are performed by using a common denomination called money. In such a system any commodity can be valued on the basis of money.

However in a barter system one commodity is exchanged for the other. Therefore, the double coincidence of wants is needed for fulfilling these transactions. The actual value cannot be determined for any commodity.

From the above we can conclude that the correct option is B.